Pubs’ New Year VAT hangover

Drinkers and pubs face a double New Year hangover with VAT and excise duty all increasing within the first three months of 2011.

VAT was increased by 2.5 per cent to 20 per cent on the 4 January, which will force many pubs to raise their prices.

And with the Budget set for 23 March, the Chancellor is already committed to increasing duty by two per cent plus inflation under the beer duty escalator. The UK’s Retail Price Index (RPI) annual inflation rate rose to 4.7 per cent in November, up from 4.5 per cent in October, official figures show, suggesting a tax hike of at least seven per cent. If that is not bad enough, the start of the year is the time when many brewers choose to increase the wholesale price of beer, blaming increases in the price of raw materials and energy costs.

CAMRA says the VAT rise alone could see the price of a pint rise by 10p and will force the rate of pub closures to increase above the current 29 a week. Chief executive Mike Benner said the time had come to scrap the duty escalator and lower VAT in pubs.

He said: “Many pub goers will be hit with a VAT increase that will push up the combined taxation on a pint of beer to more than a pound. This historically sad moment for the nation’s 15 million pub goers is compounded by the knowledge that this increase will cause yet more wellrun community pubs to shut their doors unless the government acts. Relentless tax increases on the nation’s pubs are contributing to closures, job losses and a decline in community spirit.”

CAMRA’s call for a compensatory duty cut is supported by new data from Oxford Economics. In a report to the Treasury, it said increasing VAT to 20 per cent would cause the loss of more than 7,000 pub jobs a year unless there was a compensatory cut in duty.

British Beer and Pub Association chief executive Brigid Simmonds said with dozens of community pubs closing each week in the UK, increasing VAT will have a “devastating effect on local communities and on the beer and pub industry” with thousands of jobs being lost